1. Basics of circulation of derivative securities

Depending on their role in the exercise of property rights, securities are divided into basic and derivative. Thus, basic securities are securities based on property rights to any asset, usually goods, money, capital, property of various kinds. Derivative securities serve the process of functioning of the underlying securities and are issued in connection with them.

Unfortunately, this type of classification of securities remains outside the scope of the current legislation on securities and occurs only in the economic and legal literature. If we analyze modern regulatory legal acts on securities, then only two securities can be classified as derivatives - Russian depositary receipts and issuer options.

In world practice, derivative securities perform the following functions:

certification of rights arising from ownership of the underlying security (for example, share certificates);

providing additional benefits to holders of the underlying security (options, warrants, orders);

ensuring the functioning of the underlying security (coupons); forecasting the dynamics of exchange rates and insuring holders of the main securities against their fall (futures, options);

providing the possibility of replacing the main security with its surrogate form (certificates of shares and bonds, depositary receipts);

ensuring the penetration of the underlying security into foreign stock markets (depository receipts).

Let us dwell on the characteristics of each of these documents.

A certificate of shares or bonds is a document certifying ownership of the relevant securities, as well as certifying the right to own and dispose of one or more securities. If a share certifies the right to dividends of a joint-stock company, the right to manage a joint-stock company, etc., then the share certificate certifies the right to the share itself. Hence the sign of derivativeness, that is, the origin of one security from another.

It must be recognized that in legal and economic science there are discussions about the nature of this financial instrument. Thus, many scientists have doubts about whether a certificate of shares (bonds) can be considered as a security. In essence, a certificate is evidence that a person owns a security and has no independent meaning. In the normative literature, first one or the other point of view prevailed. Thus, in the period from 1990 to 1995, in accordance with the Regulations on Joint Stock Companies, approved by Government Decree Russian Federation dated December 25, 1990 No. 601 SP of the RSFSR, 1991, No. 6, art. 92., the certificate was considered a security, but since 1995, in accordance with Federal Law No. 208-FZ of December 26, 1995 “On Joint-Stock Companies,” it is not one. Collection of Legislation of the Russian Federation,” 1996, No. 1, Art. 1.. Currently, something similar is provided for by the Securities Market Law. Thus, in basic terms there is a certificate of an issue-grade security, which is considered as a document issued by the issuer and certifying the totality of rights to the number of securities specified in the certificate (Article 2 of the Law). The legislator considers it as a documentary form of issue-grade securities. However, Article 16 of the Law contains a contradictory provision that, at the owner’s request, one certificate may be issued for two or more issue-grade bearer securities of the same issue purchased by him. The meaning of a securities certificate and its functions are discussed in the legal literature of today. See, for example, E.N. Lashes. Legal nature of corporate issue-grade securities. Gorodets. 2005. pp. 39-44..

Warrant is a derivative security, issued simultaneously with shares and bonds by the same issuer and giving the right to exchange them at a set time at a certain rate for a corresponding number of other securities. That is, the warrant is confirmation of the right to exchange. Such a right may be granted for several years or indefinitely. It should be noted that Russian legislation does not provide for this type of security.

An order is a security that gives its holder the right to purchase additional securities at an agreed price and for a specified period of time. The purpose of the order is to interest potential investors in purchasing basic securities (for example, shares) of new issues. The order is usually issued along with the underlying security. An order differs from an option in that it gives the right only to purchase securities. An order, as a security, should not be confused with orders used in accounting and legal practice. According to Russian legislation, the document in question is also not a security.

A coupon is a detachable part of the underlying security, certifying the right to receive income (interest) on it within the time frame established in it. Of all securities, historically stocks and bonds have coupons. The coupon details contain details of the underlying security. The coupon is usually attached to the underlying security and has the validity of the underlying security. But it can also exist as an annex to it. In this case, it is applied separately, and a special rate may be set for it. A coupon as a security is also not recognized by Russian legislation.

For derivatives such as depositary receipts and issuer options, see the following paragraphs.

Derivative financial instruments, which are not securities, should be distinguished from derivative securities. The Securities Market Law defines a derivative financial instrument as an agreement, with the exception of a repurchase agreement, that provides for one or more of the following obligations of a party to the agreement:

• 1) pay amounts of money, depending on changes in prices for goods, securities, the exchange rate of the relevant currency, interest rates, inflation rates, values ​​calculated on the basis of prices of derivative financial instruments, values ​​of indicators constituting official statistical information, values ​​of physical, biological and (or) chemical indicators of condition environment, from the occurrence of a circumstance indicating non-fulfillment or improper fulfillment by one or more legal entities, states or municipalities of their duties (with the exception of a surety agreement and an insurance contract), or another circumstance that is provided for by law and regarding which it is unknown whether it will occur or not , as well as from changes in values ​​calculated on the basis of one or a combination of several indicators specified in this paragraph;
• 2) on the terms determined at the conclusion of the agreement, in the event of a demand from the other party to buy or sell securities, currency or goods, or to enter into an agreement that is a derivative financial instrument;
• 3) transfer securities, currency or goods into the ownership of the other party no earlier than the third day after the day of conclusion of the agreement, the obligation of the other party to accept and pay for the specified property and an indication that such an agreement is a derivative financial instrument (for more details, see Article 2 of the Law) .

Based on the above, let’s summarize the main points.

• 1. The division of securities into basic and derivatives is not provided for by the current Russian legislation on securities.
• 2. Historically, derivative securities included stock certificates, bonds, warrants, warrants and coupons.
• 3. Currently, the Russian depositary receipt and the issuer option are suitable for the characteristics of derivative securities.
• 2. Issuer option

The issuer option is a new security for the Russian stock market. It was introduced on January 3, 2003 - the date of publication and entry into force of the Federal Law of December 28, 2002 No. 185-FZ “On amendments and additions to the Federal Law “On the Securities Market” and on the introduction of additions to the Federal Law “On Non-Commercial organizations."

In Article 2 of the Law on the Securities Market, an issuer's option is understood as “an issue security that secures the right of its owner to purchase, within the period specified therein and/or upon the occurrence of the circumstances specified therein, a certain number of shares of the issuer of such an option at a price specified in the option issuer". From a legal point of view, options can be compared to a preliminary agreement for the purchase and sale of shares, which fixes their future price and the timing of possible acquisition. When an option is purchased, the cost of the option, not the shares, is paid. The difference between an option and a preliminary agreement is that in the future the issuer does not have the right to force the option holder to buy shares from him. Then contributed to the option payment cash do not return. On the other hand, if the option is presented for exercise, the issuer is obliged to sell to its owner the number of shares specified in it at the established price. The funds contributed for the option are not counted towards payment for the shares. An option refers to derivative securities; it provides the right to purchase underlying securities - shares (the so-called underlying asset). Its role in the economy is auxiliary.

To be fair, it should be noted that the prototypes of options were introduced into Russian legislation somewhat earlier, namely by the Resolution of the Federal Commission for the Securities Market of Russia dated January 9, 1997 No. 1, which was in force until 2003, “On the option certificate, its application and approval of standards for the issue of option certificates.” and their prospectuses." The resolution defined the concept of an option certificate (but not an option) as a security and defined its legal regime. Despite the fact that the said regulatory act was prepared at a high professional level, the options market in Russia during the period of its validity was not only not developed, but also absent altogether. Krivov A. Development of options markets in Russia. //Stocks and bods market. 2000. No. 6..

The world history of options began in the 18th century in Holland, where they were first used in the sale of fresh flowers. The boom of options, as well as all other derivative financial instruments, occurred in the 80s and 90s of the twentieth century. Stock options began trading in 1973 on the Chicago Board Options Exchange (CBOE) and are now the most common options contract.

The significance of options as securities is as follows. Firstly, for the issuer, option contracts carry information about future demand for the underlying asset when deciding on its issue. An option is essentially a “pre-subscription” to buy. Secondly, an option guarantees the obligation to sell the underlying asset and fixes its price. Thirdly, it minimizes the risks of both the option holder and the issuer associated with a fall (rise) in the rate of the items underlying the option, in this case the shares at the time the option is presented for execution. If prices for the underlying asset fall, then for its holder the amount of loss will be equal to the cost of the option. For the issuer, purchased options will also reduce its losses. If, on the contrary, the value of the goods underlying the option increases, the option holder will retain the right to purchase them at the price established in the option, and the issuer will receive an additional benefit in the amount of the value of the acquired options. Thus, an option contract is a kind of risk insurance (so-called hedging). In addition, the advantage of an option is that the use of this financial instrument does not require large initial capital.

An issuer option has all the properties of a classic security. It has a market value and is traded on the primary and secondary securities markets. The issued option can be resold, etc. The secondary options market can be exchange-traded or off-exchange. However, according to Russian legislation, only shares are considered as the underlying asset.

Unfortunately, the regulatory framework for options is extremely insignificant. It is actually limited by Articles 2 and 27.1 of the Securities Market Law, as well as several regulations of securities regulatory authorities. The Civil Code of the Russian Federation does not mention options. According to Russian legislation, only joint-stock companies can be issuers of options, therefore they are classified as private securities. The issue of options is possible only after full payment of the authorized capital of the joint stock company. Potential owners of options can be any person, unless otherwise specified in the decision to issue them.

Options are issued in a manner common to all issue-grade securities. The issuer has the right to place options only within the limits of authorized shares (Article 27-1 of the Law on the Securities Market). Options are placed by open or closed subscription, and only cash can be paid for them.

Options are registered securities, uncertificated in the form of issue. An option is a future security, as follows from the definition. Their division into income-generating and non-income securities is not entirely applicable to these financial instruments. However, the benefit in buying an option is possible and will consist of the difference between the fair market value of the underlying asset on the date of exercise of the option and the price fixed in the option itself. Therefore, in economic literature it is called a speculative security.

• 1. An issuer's option is understood as an issue-grade security that secures the right of its owner to purchase, within the period specified therein and/or upon the occurrence of the circumstances specified therein, a certain number of shares of the issuer of such an option at a price specified in the issuer's option.
• 2. Only joint-stock companies can be issuers of options. The issue of options is subject to state registration.
• 3. The issuer option is a book-entry, registered, domestic, derivative, future, private, issue-grade security, unilateral, causal transaction.
• 3. general characteristics Russian depository receipt

depositary receipt option valuable

On the stock markets of individual countries, for various reasons, there are legally established restrictions on the circulation of foreign stock values. Therefore, the placement of shares (bonds) of foreign issuers occurs through an intermediary, whose role is usually reputable banks or other professional participants in the securities market. By purchasing a depositary receipt, its owner receives rights certified by a foreign security. However, such a person becomes not a direct, but rather an indirect owner of the main security of the foreign issuer. The nominal holder of the underlying security is the issuer of depositary receipts.

The appearance of depositary receipts dates back to the beginning of the 20th century and is associated with the adoption in England of a law that prohibited “the export of English shares outside the UK.” In response to this, in 1927, the American investment bank J.P. Morgan issued the first American Depositary Receipts (ADRs) for shares of the British department store chain Selfridges. Thus, the USA should be considered the birthplace of depositary receipts Khomenko E.G. Depository receipts in banking practice. // Banking law. 2010. No. 1. pp. 34 - 37..

A depositary receipt is a prominent representative of derivative securities. Its main task is to make it possible to exercise the rights granted by securities of foreign issuers (principal securities).

At the moment, the Russian depositary receipt (hereinafter referred to as RDR, depositary receipt) is the latest type of securities introduced into our legal system. The corresponding amendments to the Securities Market Law came into force on January 11, 2007. However, the debate about whether Russia needs depositary receipts has not yet completely subsided. Let us remind you that our country allows the circulation of foreign issue-grade securities directly, but in a special order and in certain cases.

Following the definition from the Law on the Securities Market, a Russian depositary receipt is a registered issue-grade security that has no par value, certifying ownership of a certain number of represented securities (shares or bonds of a foreign issuer or securities of another foreign issuer certifying rights in relation to shares or bonds of a foreign issuer) and securing the right of its owner to demand from the issuer of Russian depositary receipts to receive in exchange for the Russian depositary receipt the corresponding number of represented securities and the provision of services related to the exercise by the owner of the Russian depositary receipt of the rights secured by the represented securities. If the issuer of the represented securities assumes obligations to the owners of Russian depositary receipts, the specified security also certifies the right of its owner to demand the proper fulfillment of these obligations (Article 2 of the Law).

The legal basis for the circulation of the securities in question is the Law on the Securities Market, mainly Article 27.5-3 and several departmental acts, in particular, the repeatedly mentioned Standards for the issuance of securities and registration of securities prospectuses, which determine the procedure for issuing issue-grade securities, as well as the Regulations on the procedure for maintaining the register of owners of Russian depositary receipts, approved. By order Federal service on financial markets of the Russian Federation dated March 18, 2008 No. 08-9/pz-n Bulletin of regulatory acts of federal executive authorities, 2008, No. 19..

Let us characterize Russian depositary receipts in more detail. The issuer of such securities can only be a depository that has been carrying out depository activities for at least three years. Depository activity is a type of activity for storing issue-grade securities, as well as for recording and transferring rights to securities, which organizations can carry out only on the basis of a license.

The underlying asset is only shares and bonds of a foreign issuer or securities of a foreign issuer that certify rights in relation to shares or bonds of a foreign issuer (analogues of Russian foreign receipts abroad). Purchasers of depositary receipts can be any subjects of Russian law, unless otherwise specified in the terms of placement of depositary receipts.

Since a Russian depositary receipt is a registered issue-grade security, it can only have a non-documentary form, as follows from Article 16 of the Securities Market Law. A Russian depositary receipt is a perpetual security, since its circulation period depends on the turnover of the security to which it certifies the rights. A Russian depositary receipt is redeemed if its owner has received from the depository the corresponding number of securities represented. Regarding the distinction between the financial instruments under consideration into profitable and non-income, depositary receipts should rather be classified as non-income securities, since they play a different role in the economy, while the securities underlying them are classified as income-bearing. The main responsibility of the RDR issuer is to make payments, which can be in rubles or in foreign currency, depending on the conditions for issuing receipts. The deadline for fulfilling such an obligation is established within five days from the date the depository receives the corresponding funds from the issuer of the securities being represented.

Based on the above, let us highlight the main points.

• 1. A Russian depositary receipt is a registered emission security that has no par value, certifying ownership of a certain number of represented securities (shares or bonds of a foreign issuer or securities of another foreign issuer certifying rights in relation to shares or bonds of a foreign issuer) and securing the right of its owner to demand from the issuer of Russian depositary receipts to receive in exchange for the Russian depositary receipt the corresponding number of represented securities and to provide services related to the exercise by the owner of the Russian depositary receipt of the rights secured by the represented securities.
• 2. Only depositories can act as issuers of Russian depositary receipts.
• 3. The Russian depositary receipt is a book-entry, non-income, perpetual, registered, domestic, derivative, private, emission security, unilateral, causal transaction.
• 4. Features of the issue and circulation of Russian depositary receipts

The issue of Russian depositary receipts, like other issue-grade securities, is subject to state registration. There are two exceptions. The issue of Russian depositary receipts certifying ownership of foreign securities admitted and in direct circulation in the Russian Federation, and secondly, foreign securities that have undergone the listing procedure on foreign exchanges included in the list approved by the Russian authorized body are not subject to registration. authorities. As of September 2013, 21 foreign exchanges were included in this list. Listing means the inclusion of securities by the trade organizer in the list of securities admitted to organized trading, including the inclusion of securities by the exchange in the quotation list (Article 2 of the Law on the Securities Market). This relaxation is aimed at eliminating double control and facilitating the issuance of RDRs on securities of reliable and already verified foreign issuers. One issue of receipts can be carried out only for one type (type, category) of the represented security. However, one depository receipt may certify ownership of one or more securities of a foreign issuer, as indicated in the decision on the issue.

The procedure for issuing depository receipts is common for all issue-grade securities with some features specified in Article 27.5-3 of the Law on the Securities Market and Securities Issue Standards. For example, the procedure for issuing Russian depositary receipts includes three rather than five stages, in particular - approval of the decision to issue Russian depositary receipts by the authorized body of their issuer - the depository; state registration of the issue of Russian depositary receipts or assignment of an identification number to the issue of Russian depositary receipts; 3) placement of Russian depositary receipts. In addition, state registration of an additional issue of Russian depositary receipts is not required. In this case, changes are made to the decision to issue the RDR, defining the conditions for the additional issue, which are registered.

The placement of Russian depositary receipts is possible through closed and open subscription. Accounting for rights to Russian depositary receipts is carried out through entries in the RDR register. This function can be performed by their issuer-depository, regardless of the number of owners of Russian depositary receipts.

Russian depositary receipts, depending on the scope of the issuer’s responsibility for the exercise of rights arising from the securities represented, can be divided into “sponsored” and “unsponsored”. These terms are placed in quotation marks because they are not used in Russian legislation. Under sponsored RDRs, the issuer assumes obligations to the owners of the receipts to exercise the rights under the securities represented. In particular, on the payment of income on the represented securities, on the exercise by the owners of RDRs of the right to vote at a meeting of shareholders (if the represented security is a share). Thus, sponsored receipts are more reliable, since the depositary ensures the proper performance of the obligations of the issuer of the foreign securities represented.

Unsponsored depositary receipts, accordingly, are securities for which the issuer does not assume obligations to their owners. Their issue is permitted only in relation to the represented securities that have undergone the listing procedure on a foreign exchange included in the list approved by the securities market authority (see above).

In conclusion, I would like to note that the work on issuing depository receipts is accompanied by the preparation of a large number of legally significant documents, including foreign language. Close interaction between the Russian depositary and the foreign issuer is necessary, the result of which is an agreement defining mutual rights and obligations. In addition, the issuer of Russian depositary receipts must document the personal account of the nominee holder in the national depository of the issuer of the securities represented. Such a depository can only be an organization included in a special list established by the authorized body of the Russian Federation (today this list is approved by Order of the Federal Service for Financial Markets of the Russian Federation dated July 28, 2011 No. 11-35/pz-n and it includes 63 foreign organizations Russian newspaper, 2011, No. 207.).

As of September 2013, only one issue of Russian depositary receipts has been carried out in Russia, namely for shares of OJSC Rusal, registered in 2010. One depositary receipt entitles the holder to ten shares of the company. The issuer of the receipts is Sberbank OJSC. A radically opposite situation occurs with foreign depositary receipts. According to data at the beginning of 2013, depositary receipts for shares of issuers from 85 countries are traded on the world stock market, among which Russia occupies a significant place. Russian organizations carried out 230 issues of American and global depositary receipts Makshanova T.V. Analysis of the current state of the market for American and global depositary receipts. / T. V. Makshanov. // Young scientist, 2013, No. 2. pp. 167-172..

Let's sum up the intermediate results.

• 1. The procedure for issuing Russian depositary receipts has certain features. The law allows for two cases of issuing RDRs without state registration.
• 2. Accounting of rights to Russian depositary receipts can be carried out by their issuer, regardless of the number of their owners.
• 3. Depending on the scope of the issuer’s responsibility for the exercise of rights arising from the securities represented, the latter can be classified into sponsored (for which the issuer-depository assumes responsibilities for the foreign issuer) and unsponsored.

Literature

• 1. Belov V. A. Securities in Russian civil law: Tutorial on a special course: In 2 volumes, 2nd ed., revised. and additional M., 2007.
• 2. Gabov A.V. Securities: questions of theory and legal regulation of the market. M.: Statute. 2011.
• 3. Efremov A. Russian depositary receipts. // Corporate lawyer. 2007. No. 4.
• 4. Migol E.V. Russian depositary receipts have been legalized. // Regulation of banking operations. Documents and comments. 2007. No. 2.
• 5. Rothko S.V. Timoshenko D. Derivative financial instruments: current issues// Economy and law. 2008. No. 6. pp. 103 - 105.
• 6. Rothko S.V. Credit derivative financial instruments in the light of the Concept of civil legislation and the Concept of securities and financial transactions // Taxes. 2011. No. 5. pp. 19 - 23.
• 7. Sukhoruchkin P.A. Option as a derivative security. // Law and Economics. 1998. No. 5.
• 8. Khomenko E. G. Depository receipts in banking practice. // Banking law. 2010. No. 1. pp. 34 - 37.
• 9. Shevchenko G.N. Issue-grade securities: concept, issue, circulation. M.: Statute. 2006.

Regulatory acts

• 10. Federal Law of April 22, 1996 No. 39-FZ “On the Securities Market”. // Collection of legislation of the Russian Federation, 1996, No. 17, art. 1918.
• 11. Order of the Federal Service for Financial Markets of the Russian Federation dated July 28, 2011 No. 11-35/pz-n “On approval of the List of organizations in which Russian depositories can open accounts to record rights to foreign securities for the purpose of issuing Russian depositary receipts " // Rossiyskaya Gazeta", 2011, No. 207.
• 12. Order of the Federal Service for Financial Markets of the Russian Federation dated April 27, 2010 No. 10-29/pz-n “On approval of the Criteria and Procedure for including foreign stock exchanges in the List of foreign stock exchanges, the listing procedure on which is a prerequisite for accepting the Russian stock exchange decisions on the admission of securities of foreign issuers to trading without a decision of the federal executive body for the securities market on their admission to public placement and (or) public circulation in the Russian Federation, as well as on approval of the specified List.” // Bulletin of normative acts of federal executive authorities, 2010, No. 26.
• 13. Order of the Federal Service for Financial Markets of the Russian Federation dated March 18, 2008 No. 08-9/pz-n “On approval of the Regulations on the procedure for maintaining the register of owners of Russian depositary receipts.” // Bulletin of normative acts of federal executive authorities, 2008, No. 19.
• 14. Order of the Federal Service for Financial Markets of the Russian Federation dated January 25, 2007 No. 07-4/pz-n “On approval of Standards for the issuance of securities and registration of securities prospectuses.” // Bulletin of normative acts of federal executive authorities, 2007, No. 25.

"Regulation of banking operations. Documents and comments", 2007, N 2
RUSSIAN DEPOSITORY RECEIPT ARE LEGALIZED
On January 10, 2007, the Federal Law of December 30, 2006 N 282-FZ “On Amendments to the Federal Law “On the Securities Market” was published in Rossiyskaya Gazeta. What operating prospects are now opening up for domestic companies and organizations? Will there be a Law help attract capital and foreign investors to the Russian economy or is this another point confusing our already cumbersome and complex legislation?
Goals and subject of the Federal Law
In order to increase the capitalization of the stock market in Russia, last year a proposal was submitted to the State Duma of the Russian Federation Central Bank of the Russian Federation to make some changes to the current Federal Law of April 22, 1996 N 39-FZ “On the Securities Market”. For about six months, work was carried out on the bill "On Amendments to the Federal Law "On the Securities Market", the draft was finalized and revised several times and was adopted by the State Duma in the third reading on December 8, 2006, approved by the Federation Council on December 22, 2006.
In accordance with the new Law, an addition to Art. 2 of the current Federal Law: another type of equity security appears - the Russian depositary receipt (hereinafter - RDR). With the acquisition of an RDR, its owner automatically receives ownership of the shares or bonds of a foreign issuer that are represented by this depository receipt, that is, he receives the right to payments and services agreed upon during the purchase due on the represented foreign securities. All responsibility for payments and provision of services rests with the RDR issuer.
The nominal value of the Russian depositary receipt is not provided. RDR is a bearer security and is issued in documentary form with mandatory centralized storage.
The essence of depositary receipts is that the investor is given the opportunity to exercise the rights of the owner related to the use and disposal of securities of foreign issuers, while it will be very desirable if the investor and the foreign issuer remain within the national legal framework. In order to build a consistent relationship between an investor and a foreign issuer of securities, an intermediary is needed. The issuer of Russian depositary receipts can become such an intermediary.
About the issuer of Russian depositary receipts
According to the adopted Law, the issuer of a Russian depositary receipt can only be a depositary created in accordance with the legislation of the Russian Federation, possessing a certain capital (own funds) and having at least 3 years of experience in depository activities.
Article 7 of the Law “On Securities” has been supplemented with a part that sets out in detail the rights and obligations of the depositary and the depositor in accordance with the decision to issue Russian depositary receipts.
Namely, if the agreement between the depository and the depositor stipulates a service related to the receipt of income on securities and other payments due to the owners of securities, then:
- depositors’ funds must necessarily be in a separate bank account (accounts) opened by the depository in a credit institution, the so-called special depository account;
- the depository is obliged to provide the depositor with appropriate reporting on maintaining the securities account;
- funds of depositors located in a special depository account (accounts) cannot be levied against the obligations of the depository;
- the depositary does not have the right to credit its own funds to a special depositary account (accounts), except in cases of payment to the depositor;
- the depositary does not have the right to use in its own interests the funds located in the special depositary account (accounts).
It should be emphasized that Part 15 specifically notes that all the requirements of Art. 7 on maintaining a separate bank account does not apply to credit organizations.
The obligations assumed by the depositary must correspond to the rights that it receives in relation to the securities of a foreign issuer on the basis of an agreement concluded between them.
Before the issuer of depositary receipts can offer a Russian investor a product of a particular foreign market, he must study securities legislation, international private law rules and, if necessary, enter into an agreement with the issuer of the underlying securities in such a way as to exclude possible conflicts of legal norms of Russian and foreign legislation. If any credit organization acts as a depository, then its responsibilities will include resolving disagreements or any inconsistencies between the laws of the country of the issuer of securities and Russia, therefore, all responsibility for this process will lie with the Russian credit organization, which in this case will be the depositary of receipts.
As a rule, throughout the world, the issuers of depository receipts are not central or settlement depositories, but commercial banks. The Law does not take this point into account. Combining settlement and depository services for professional market participants and the functions of an issuer of securities will be quite risky for depository companies, although, in fact, this is technologically feasible and should not cause any conflicts with the law.
Procedure for issuing Russian depositary receipts
The existing Securities Law was supplemented by Art. 27.5.3 "Features of the issue and circulation of Russian depositary receipts."
The procedure for issuing depository receipts includes several stages:
- approval of the decision on the issue (additional issue) of Russian depositary receipts by the authorized body of their issuer-depository;
- state registration of the issue (additional issue) of Russian depositary receipts;
- placement of Russian depositary receipts.
The decision to release, in turn, in addition to all other information specified by this Federal Law, must contain:
- information about the name and location of the issuer of the securities being presented. That is, information about the issuer of those foreign shares or bonds that will be represented by a Russian depositary receipt;
- information about the type, category or type of securities presented;
- rights that the represented securities provide to their owners;
- the number of securities, the ownership of which is certified by one Russian depositary receipt of a given issue (additional issue), that is, the number of foreign securities that is represented by one RDR;
- conditions for the placement of Russian depositary receipts, including the maximum number of Russian depositary receipts of an issue (additional issue) that can be in circulation at the same time;
- the rights of owners of Russian depositary receipts, as well as the procedure for the exercise (realization) by owners of Russian depositary receipts of the rights secured by the represented securities;
- the deadline for making payments due to the owners of Russian depositary receipts for the securities represented;
- list and amount of funds withheld by the issuer in connection with payments on the securities represented, as well as the grounds for such withholdings;
- certain obligations of the depositary, including the obligation to provide, at the request of the owner of the Russian depositary receipt, the corresponding number of securities being represented.
Separately, cases are stipulated if the securities provided are shares. Owners of RDRs must send instructions to the depository on the voting procedure for such shares, and depositories, in turn, are obliged to exercise the right to vote on shares of a foreign issuer only in accordance with the instructions of the owners of Russian depositary receipts and provide them with voting results. Thus, the depository will act as an intermediary between the owner of the RDR and the foreign issuer of shares, that is, assume full responsibility for fulfilling the requirements of the holder of the RDR, if they do not contradict Russian legislation and are specified in the agreement.
The decision to issue RDRs may not contain the term for their placement, that is, unlike the decision to issue other securities, the requirements establishing obligations to complete the placement no later than one year do not apply to depository receipts.
The prospectus for the issue of Russian depositary receipts must contain information about the securities being represented, as well as about the issuer of the foreign securities being represented.
The depository is obliged to submit a report to the federal executive body for the securities market on a quarterly basis during the entire period of placement of Russian depositary receipts:
- on the results of the placement of Russian depositary receipts, containing information on the number of Russian depositary receipts placed in the reporting period;
- about the remaining number of Russian depositary receipts that the depository has the right to place within the maximum number determined by the decision on the issue of Russian depositary receipts;
- on the number of securities presented, the storage and recording of rights to which was provided by the depository.
When placing Russian depositary receipts, the depository must ensure that the number of Russian depositary receipts corresponds to the number of securities being presented.
Public placement and (or) circulation of Russian depositary receipts is permitted only in the following cases:
- existence of an agreement with the issuer of the securities being represented;
- circulation of represented securities at auctions on foreign stock exchanges, the list of which is established by the federal executive body for the securities market.
Payments to owners of Russian depositary receipts are made by the issuer of Russian depositary receipts in the currency of the Russian Federation, unless otherwise established by the decision on the issue of Russian depositary receipts. The period for fulfilling obligations related to the implementation of these payments cannot exceed 5 days from the moment the depository receives the corresponding payments from the issuer of the securities being represented. Such short deadlines for payments to holders of depository receipts impose a serious additional burden on the depositary.
If the owner of Russian depositary receipts has received from the depository the corresponding number of securities represented, or sum of money Instead of the securities being presented, Russian depositary receipts are subject to redemption.
The Securities Law of 1996, in connection with the implementation of the RDR, was supplemented by another important point, according to which the restrictions on the circulation of issue-grade securities contained in this Law do not apply to Russian depositary receipts and the securities they represent. Thus, the circulation of RDRs is allowed until they are fully paid and the state registration of the report on the results of the issue, and their public circulation is also allowed before the registration of the prospectus. Such relaxations on the part of the state most likely indicate a policy of encouragement, that is, maximum interest in the speedy launch of the circulation mechanism of Russian depositary receipts.
A fly in the ointment, or shortcomings of the Law
The Law pays little attention to the topic of organizing income payments under the RDR. The procedure for this procedure must be clearly stated. It is also necessary to establish a procedure for the secondary circulation of depositary receipts on the territory of Russia and determining the tax base of its participants. The Law does not contain a precisely formulated procedure for taxation of activities related to issuing and carrying out transactions with RDRs.
Another question regarding this document is the possibility of issuing financial instruments, including RDRs for shares of foreign credit organizations. The problem of participation in capital credit institutions primarily affects various aspects of banking regulation and banking supervision in relation to the receipt by the Bank of Russia of relevant information about the ultimate beneficiaries of credit institutions. The existing system for issuing American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) does not allow the Bank of Russia to receive in real time the information it needs as a supervisory authority. Today, the Bank of Russia does not have such opportunities to equate depository receipts with securities.
The problem of placing foreign securities on the domestic stock market arose a long time ago. On January 1, 2007, the Federal Law of December 30, 2006 N 267-FZ “On Amendments to the Federal Law “On Currency Regulation and Currency Control” came into force, allowing transactions between residents and non-residents without restrictions in the field of international transportation, which , of course, partially solves this problem. But it should be taken into account that only certain transactions with foreign securities that are carried out between residents are permitted by our currency legislation. The introduction of RDR will certainly facilitate the admission of foreign securities to the Russian organized market, but here too. there are pitfalls.
Theoretically, thanks to the adopted Federal Law of December 30, 2006 N 282-FZ "On Amendments to the Federal Law "On the Securities Market", the volume of foreign securities on the Russian market should increase, but there is a possibility of a technical problem such as the inability to reach an agreement with the relevant regulators foreign states on admission to public circulation on the domestic organized market of foreign securities. Unfortunately, such negotiations do not always provide an opportunity to smoothly organize the circulation of foreign securities in Russia. In addition, there is no certainty that foreign issuers will be interested in attracting capital in Russia. Russia with the help of depository receipts. Plus, RDRs will have to be traded not by foreigners, but by domestic brokers, whose analytical departments process information about Russian companies. However, it will be difficult for them to calculate the features of other markets. Of course, you can use the reports of foreign companies, but selling other people’s ideas. thankless job. In any case, issuing RDR is either a colossal additional burden on the analytical department brokerage company, or semi-finished product. Perhaps, at the first stage, the matter will be limited to the issue of RDRs for shares of issuers of the CIS countries, primarily Ukraine, Belarus, and Kazakhstan, which are more understandable to our professional participants. Another option is that RDRs will be traded by subsidiaries of global investment companies present in all world markets.
RDR is a necessary innovation on the Russian stock market
Drawing a conclusion about the new Law adopted by the State Duma on December 8, 2006, it should be recognized that some unaccounted for details still remain: schemes for resolving contradictions that may arise when comparing our legislation and foreign ones have not been fully resolved. For example, it is mandatory to store all securities of a mutual investment fund in a special depository created in the form of a Russian joint-stock company, which, according to some analysts, is undesirable for general economic reasons, and is legally unacceptable for institutional investors.
Nevertheless, the necessity of the Law is also impossible not to recognize: the demand for foreign securities on the part of the Russian market is obvious, but the desire of foreign issuers to enter into the Russian legal field with their primary securities is not visible. From the point of view of domestic investors, the absence of foreign securities on the Russian market represents a significant problem, because the diversified development of investments in national liquid securities can only be achieved nominally. The political and economic situation in the country affects the diversification of investments more than the activities of the issuers themselves, this can be judged by the change in the price of most issues of shares that make up the MICEX index, which have correlation coefficients with changes in the index itself from 0.7 to 0.92.
Thus, the creation of an RDR is another attempt to integrate Russia into the world market and a way to attract foreign investors, perhaps even more successful than, for example, the IPO (initial public offering), which is very fashionable today among large organizations. Plans have already been announced for an IPO by VTB, Sberbank of Russia, JSCB ROSBANK and JSCB Gazprombank (CJSC). Of course, an IPO is an excellent tool for raising capital, providing the opportunity for a fair assessment of the company’s value and access to a target investor base. But in this way, placements move to foreign markets, which not only impedes the growth of the domestic market, but also negatively affects professional bidders. In 2004 - 2005 on Western exchanges through IPOs in the form of ADRs (American Depository Receipts), shares of Russian companies were placed for more than $4.7 billion, while the volume of initial placements on Russian exchanges for the same period amounted to only $622 million (12% of the total volume of initial placements of Russian companies). Russian depositary receipts should become an investment incentive in the national legal framework for private investors and the only opportunity, in the absence of foreign securities on the Russian market, to place securities of foreign issuers on domestic exchanges. VDRs will also facilitate the use of international diversification for companies managing investment funds.
Russia cannot escape the confrontation between the desire to harmoniously join the world economy and at the same time keep the maximum of its capital at home. The most reasonable price for this is the degree of openness of the economy, which, while simultaneously attracting foreign participants in the stock market, would exclude the uncontrolled export of capital in the event of an unfavorable situation. It is obvious that investing in RDR is a form of capital outflow that is more subject to government regulation than the investor’s free access to the global market. Consequently, the emergence of RDRs should be organized by the state and become an integral and integral part of the development of the stock market, and not the result of this development. It is possible that the market is not fully ready for this innovation now - not all banks will be able to master the RDR business in the short term, but all the necessary remaining transformations will have to occur as the Law takes effect. Most likely, this Law will entail a number of other innovations in Russian financial law.
E.V. Migol
Economic Process Analyst
State University -
High School of Economics
Signed for seal
12.03.2007

The processes of globalization and integration of financial markets contribute to the emergence of new financial instruments that allow the movement of capital even with significant differences in national legal systems. Depository receipts are a common tool in world practice that allows you to organize the circulation of securities outside the jurisdiction where they were issued.

They started talking about the need for such a financial instrument in Russia several years ago. The starting point in the creation of Russian depositary receipts should be considered June 2006, when the “Strategy for the development of the financial market of the Russian Federation for 2006-2008” was approved by order of the Government of the Russian Federation dated 01.06.2006 No. 793-r. The strategy stipulated that in order to stimulate the concentration of operations with financial assets other countries on Russian exchanges, it is necessary to create a legal basis for the issuance and circulation of Russian depositary receipts for these assets. In fact, this was the first step towards opening up for foreign issuers Russian market valuable papers.

Features and prospects of Russian depositary receipts

Let's take a closer look at what depositary receipts are in general and Russian depositary receipts in particular.

Simply put, depositary receipts can be considered as securities representing a certain number of underlying shares (or bonds) and certifying the rights of their owner in relation to the underlying asset (shares, bonds) of a foreign issuer. Trading and settlement of depositary receipts takes place outside the country in which the issuer of the underlying shares (or bonds) is registered. Issuers of depository receipts are depositories operating on the national stock market. They are also transferred the rights to the corresponding number of securities issued abroad. Custodians of the underlying assets are depositories in foreign countries.

Basic terms

When describing the procedure for issuing and circulating Russian depositary receipts, the following terminology will be used:

- RDR issuer - a depository created in accordance with the legislation of the Russian Federation, meeting the requirements for the amount of equity capital (own funds) and the period of activity established by the regulatory legal acts of the Federal Financial Markets Service of Russia;

— issuer of the represented securities — entity created in accordance with foreign law;

- RDR registrar - RDR issuer-depository or registrar - a specialized organization carrying out activities to maintain the register on the basis of the issuer’s instructions;

— custodian — a foreign registrar/depository that records rights to the securities represented and is included in the list approved by the federal executive body for the securities market — the Federal Financial Markets Service of Russia;

— Russian Stock Exchange is a stock exchange on the territory of the Russian Federation that admits RDRs to trading with/without going through the listing procedure.

Russian depositary receipts are a new instrument of the Russian stock market, the main essence of which is the opportunity for foreign issuers to enter the Russian market through the implementation of depository programs for shares and (or) bonds.

The infrastructure for issuing RDRs can be represented as the following Scheme 1:

Scheme. RDR 2 release infrastructure

Regulatory regulation of the rights of RDR owners

The regulatory legal framework for Russian depositary receipts is following documents:

— Federal Law No. 39-FZ of April 22, 1996 “On the Securities Market” (introduces the concept and establishes general requirements for the issuance of Russian depositary receipts) (hereinafter referred to as the Law on the Securities Market);

— standards for issuing securities and registering securities prospectuses, approved by Order of the Federal Financial Markets Service of Russia dated January 25, 2007 No. 07-4/pz-n (establishes the procedure for issuing and state registration of the issue of Russian depositary receipts, requirements for documents drawn up during the issue);

— regulations on the disclosure of information by issuers of equity securities, approved by Order of the Federal Financial Markets Service of Russia dated October 10, 2006 No. 06-117/pz-n (regulates the composition, procedure and timing of mandatory disclosure of information by issuers of Russian depositary receipts);

— regulations on activities for organizing trade in the securities market, approved by Order of the Federal Financial Markets Service of Russia dated October 09, 2007 No. 07-102/pz-n (regulates the procedure for public circulation of Russian depositary receipts at trading on stock exchanges (securities listing);

— a list of organizations in which Russian depositories can open accounts to record rights to foreign securities for issuing Russian depositary receipts, approved by Order of the Federal Financial Markets Service of Russia dated April 27, 2007 No. 07-52/pz-n;

— a list of stock exchanges, the inclusion of foreign securities in the quotation lists of which is a mandatory condition for the issue of Russian depositary receipts in the event that the issuer of foreign securities does not assume obligations to the owners of Russian depositary receipts (approved by Order of the Federal Financial Markets Service of Russia dated April 27, 2007 No. 07-51/pz-n);

— standards for the adequacy of own funds of professional participants in the securities market, as well as management companies of mutual funds investment funds and non-state pension funds, approved by Order of the Federal Financial Markets Service of Russia dated April 24, 2007 No. 07-50/pz-n.

REFERENCE
The most well-known types of depositary receipts are American Depositary Receipts (ADR), European Depository Receipts (EDR) and Global Depositary Receipts (GDR). ADRs are issued for circulation in the US markets, EDRs are issued only for circulation in the markets of countries Western Europe(mainly in London and Luxembourg), GDRs can be traded in both European markets and the USA.
Global depositary receipts are placed outside the country of the issuing company in the markets of two or more countries.

The definition of a Russian depository receipt was introduced by Art. 2 of the Law on the Securities Market.

A Russian depositary receipt (RDR) is a registered book-entry security that:

- has no nominal value;

— certifies ownership of a certain number of shares or bonds of a foreign issuer (represented securities);

— secures the right of its owner to demand from the RDR issuer to receive in exchange for the RDR the appropriate number of represented securities and to provide services related to the exercise by the owner of the RDR of the rights secured by the represented securities.

So, RDR is a security whose underlying asset is the securities of a foreign issuer. At the same time, RDRs of one issue can certify the ownership of the represented securities of only one foreign issuer and only one type (category, type).

The rights secured by the represented securities, including those related to the receipt of income on them, are exercised in favor of the owners of RDRs who are such on the date of compilation of the list of owners of the represented securities and who have the corresponding rights, including to receive income from the securities and other due payments to owners. Payments to RDR holders are made by the RDR issuer in the currency of the Russian Federation, unless otherwise established by the decision on the issue of RDR. The period for fulfilling obligations related to making these payments cannot exceed five days from the date the depository receives the corresponding payments from the issuer of the securities being represented.

To protect investors from the risk of bankruptcy of the RDR issuer, the Law on the Securities Market stipulates that in case of provision of services to the depositor related to the receipt of income on securities and other payments due to the owners, the funds of the depositors must be in a separate bank account opened by the depository in a credit institution (special depository account).

Features of the circulation of RDR

RDR has a number of features compared to other types of securities existing in Russia:

— a report on the results of the RDR issuance is not registered;

— there is no requirement to complete the placement of RDRs within one year from the date of state registration of their issue;

— circulation of RDRs can be carried out after state registration of their issue;

— RDR is redeemed when the securities certified by it are issued to the owner of the RDR;

— with the redemption of RDRs, the maximum number of depositary receipts that can simultaneously be in circulation in accordance with the decision to issue RDRs does not change;

- the RDR register can be maintained by their issuer - the Russian depositary, regardless of the number of RDR owners.

The issuer of RDRs can only be a depositary:

— created in accordance with the legislation of the Russian Federation;

— meeting the requirements for the amount of equity capital (at least 200 million rubles of equity capital) established by the federal executive body for the securities market;

— carrying out depository activities for at least three years.

There are two types of RDR release programs - “Sponsored” and “Unsponsored”.

When issuing sponsored securities, an agreement is concluded between the issuer of the underlying asset and the Russian depository - the issuer of RDRs, according to which the issuer of the securities being represented assumes obligations to the owners of the RDRs. In this case, the RDR also certifies the right of its owner to demand the proper performance of these duties.

When issuing unsponsored securities, the issuer of the underlying securities does not assume obligations to the holders of RDRs. In this case, the issue of RDRs is possible only if the securities represented are included in the quotation lists of foreign stock exchanges, the list of which is approved by the federal executive body.

If the issuer of the represented securities (foreign issuer) assumes obligations to the owners of RDRs, then the depositary receipt also certifies the right of its owner to demand the proper fulfillment of these obligations.

The obligations of the issuer of the represented securities to the owners of the RDR must be provided for in the agreement between him and the issuer of the RDR. The necessary terms of the contract are:

— an indication of the rights secured by the securities being represented;

— the obligation of the depository to ensure that the number of RDRs in circulation corresponds to the number of securities represented, the rights to which are recorded in an account opened to it as a person acting in the interests of other persons;

— an indication that the securities presented are issued for the placement of RDRs and (or) are in circulation;

— the procedure for the issuance (sending) by the owners of RDRs of instructions to the depository on the procedure for voting on shares and the obligation of the depository to ensure the exercise of the voting right on shares of a foreign issuer (represented securities) only in accordance with the instructions of the owners of the RDRs, as well as to present the voting results to the owners of the RDRs;

— the obligation of the issuer of the securities being represented to provide information in Russian in a volume and within a time frame that provides the depository with the opportunity to disclose it in the volume, manner and within the time limits provided for by the legislation of the Russian Federation;

— the obligation of the depositary to disclose information received from the issuer of the securities being represented no later than the day following the day of its receipt;

— an agreement on the application of the laws of the Russian Federation to relations arising from this agreement;

— an agreement on the consideration of disputes arising as a result of non-fulfillment or improper fulfillment of obligations under the contract in the territory of the Russian Federation by courts, the decisions of which can be recognized in the territory of the issuer’s country in accordance with an international treaty of the Russian Federation;

— provision on the liability of the depositary and the issuer of the represented securities for failure to fulfill or improper fulfillment of their obligations under the agreement to the owners of RDRs;

— a provision that the contract cannot be terminated without the consent of the owners of the RDR.

From the date following the date of state registration of the RDR issue, the issuer becomes obligated to disclose information. There are differences between sponsored and unsponsored RDRs regarding the disclosure of information by the issuer of the RDRs. When issuing sponsored RDRs, the issuer is required to disclose information received from the issuer of the underlying securities. When issuing unsponsored securities, the issuer of RDRs is required to disclose information that is disclosed in accordance with foreign law by the issuer of the underlying securities on a foreign stock exchange to foreign investors.

The issuer of RDRs is required to disclose the financial statements of the issuer of the securities represented, prepared in accordance with IFRS or US GAAP. If an RDR prospectus is registered, the issuer is required to disclose information about the issuer of the securities being represented and the securities being represented in the form of a quarterly report and statements of material facts.

The issue of RDRs, in contrast to the standard issue of securities by Russian issuers, consisting of five stages, includes only three:

— approval of the decision to issue Russian depositary receipts by the authorized body of their issuer-depository;

— state registration of RDR issue;

— direct placement of the RDR.

REFERENCE
Depository receipts (DRs) were invented in 1927 by the financial company Morgan Guaranty and were intended to simplify the public offering of securities of the famous British supermarket Selfridge on the American market. The financial crisis of 1929 and the Great Depression slowed down the development of the DR market for a long time.
A real boom in the early 1990s. was associated with the massive entry into the American and European markets of issuing companies from Southeast Asian countries, Australia and a number of Latin American countries.
At the end of 2008, the volume of DR trading in the world exceeded $4.4 trillion, which became a historical record. At the end of 2009, this volume decreased to $2.7 trillion, according to the annual report of the Bank of New York Mellon (BoNY Mellon), one of the world's main depositories. According to the same source, in total, $32 billion was raised last year through the issuance of depository receipts, which is 122% higher than the volume recorded in 2008 — $14.4 billion.
Issuers from countries with developing economies (emerging markets) continue to occupy a dominant position in the world markets of American and global depositary receipts for shares, BoNY Mellon analysts report. Leader in terms of volume of transactions with DR on shares in the region of Eastern Europe, Middle East and Africa (EEMEA) at the end of 2009 became OJSC Gazprom (about $66 billion). The top five in terms of trading activity also included Russian JSC LUKOIL and OJSC Rosneft.

Thus, the issuance of RDRs is carried out without making a decision on their placement, submitting to the FSFM of Russia a report on the results of issuing the RDR and its state registration, and also without submitting to the FSFM of Russia a notification on the results of issuing the RDR.

The placement and circulation of RDRs can be carried out after state registration of their issue, and the placement and circulation of RDRs of an additional issue - after registration of changes made to the decision to issue the RDR. Thus, state registration of additional RDR issues does not occur, and an increase in the maximum number of RDR issues that can be in circulation at the same time is carried out by amending the decision on the issue of RDR. Moreover, the placement of RDRs can be carried out through both open and closed subscription.

An important advantage of issuing RDRs over issuing other securities is that the issuer is not obligated to complete the placement of securities no later than one year from the date of state registration of their issue.

There are conditions when the issuer of RDRs is obliged to suspend the placement of RDRs. This happens in the case:

— crushing of RDR;

— splitting or consolidation of the securities represented;

— changes in the scope and (or) procedure for exercising the rights secured by the securities represented.

The placement of the RDR is resumed from the moment the registered changes to the decision to issue the RDR come into force.

Market development forecast and potential RDR issuers

Now we can definitely say that the way for foreign issuers to enter the Russian securities market is open by issuing RDRs. The legal basis for this has been created at the legislative level; the first RDRs have begun circulating on Russian exchanges. What's next? Who is interested in listing their securities on the Russian stock market, who are they, potential issuers?

Experts primarily name the CIS countries, where the capital market is less developed, where companies are interested in attracting capital from the Russian stock market at a lower cost (compared to the American and European markets). According to experts, companies from countries such as Ukraine, Kazakhstan, Belarus, etc. may prefer the Russian securities market.

The second group includes companies from non-CIS countries that have strategic plans to enter the Russian market, as well as companies that have placed their shares not in Russia, but own assets in Russia, and therefore count on the interest of Russian investors. This also partially includes companies that have placed their shares on the markets of England (LSE), Germany (Deutsche Borse), etc.

IN last years A third group of companies—potential RDR issuers—has also formed. These are holdings registered in offshore zones, which conducted an IPO (Initial Public Offering - an initial public offering of company shares for sale to a wide range of people) abroad and owning 75-100% of all their assets in Russia.

Accounting for transactions with depositary receipts

Currently, accounting for transactions with depositary receipts regulations The Bank of Russia has not been established. In this regard, the following options for accounting for acquired DR are possible.

Option 1. Due to the fact that depository receipts are issued as an independent type of equity securities, and also have their own properties and registration number (ISIN), they are accounted for on the balance sheet as independent securities. Thus, depositary receipts are subject to accounting, depending on their type and qualifications, in accounts 50104-50110, 50205-50211, 50305-50311 “Investments in debt obligations” and in accounts 50605-50608, 50705-50708 “Investments in equity securities” .

Option 2. Due to the fact that DR certify the right to a certain number of shares or bonds, and also allow the exercise of part of the rights of the owner of these shares or bonds (voting, income/dividends), on the balance sheet they are accounted for as investments in shares or bonds (but with your registration number or ISIN). Thus, depositary receipts are subject to accounting in the same accounts as in option 1, only as shares or bonds directly.

Option 2 is more convenient due to the fact that, firstly, the issue of the currency of DR accounting is immediately removed (remember that DR has no face value). Secondly, the issue of determining the current fair value of DR is easier to resolve, since it is automatically equated to the price of the underlying shares or bonds. Thirdly, it is clearer to fill out reporting forms (for example, form 0409116 “Information on securities acquired by a credit institution”). However, from an economic point of view, DRs are still not shares and bonds, but are derivative financial instruments; in addition, the same reporting forms indicate the form of paper (in particular, a “depository receipt”), foreign DRs carry currency risk etc. Taking into account the above, option 1 seems more correct, while the bank’s accounting policy should stipulate that the DR is accounted for in the currency of the country in which the receipt was issued, and establish a procedure for determining the current (fair) value (if the DR is accounted for in accounts for recording valuable assets) securities measured at fair value through profit or loss).

Even more confusing is the question of the accounting procedure for issued RDRs. In the chart of accounts in Sect. 5 does not provide accounts for accounting for issued DRs, and therefore, apparently, it is advisable to account for issued DRs on separate personal accounts of balance sheet account 47422 “Liabilities for other operations” in the context of issues (registration numbers) of DRs.

The chosen accounting option must be fixed in the bank's accounting policy.

The issue of RDR is reflected in accounting by the following entries.

Purchase by the depositary bank of shares or bonds underlying the RDR:

Dt 501-503 “Investments in debt securities”, 506, 507 “Investments in equity securities”

CT account for cash accounting - for the amount of purchased securities.

Transfer of shares (bonds) to the depository account of the issuing bank of the DR:

Dt 98010 “Securities stored in the leading depository (NOSTRO depot basic)”

Kt 98050 “Securities owned by the depositary” - for the number of shares (bonds) received.

RDR emission:

Kt 47422 “Liabilities for other operations”, “Issued RDR” - for the cost of issued RDR.

Receiving payment for issuing sponsored RDRs:

Dt account for cash accounting

Kt 70601 (13201) “Income from transactions with issued securities” - in the amount of the fee for issuing RDRs.

During RDR servicing:

Receiving interest, coupons, dividends on securities underlying the RDR:

Dt account for cash accounting

Kt 47422 “Liabilities for other transactions”, “Calculations for interest, coupons, dividends” - for the amount of interest, coupons, dividends.

Transfer of interest, coupons, dividends on securities underlying the RDR:

Dt 47422 “Liabilities for other operations”, “Calculations for interest, coupons, dividends”

CT accounts for cash accounting, current accounts - for the amount of interest, coupons, dividends.

Issued RDRs are redeemed by issuing instead the shares or bonds underlying them:

Dt 47422 “Liabilities for other operations”, “Issued RDR”

Kt 501-503 “Investments in debt securities”, 506, 507 “Investments in equity securities”.

The operation is accompanied by the write-off of issued shares or bonds from the depository account.

Accounting for investments in RDRs is carried out in the manner established for the acquisition of securities by Appendix 11 to Bank of Russia Regulation No. 302-P dated March 26, 2007, and in accordance with the above principles.

Accounting for investments in RDR:

Dt 50605, 50705 “Investments in equity securities of credit institutions” (option 1)

Dt 50608, 50708 “Investments in equity securities of other non-residents” (option 2)

CT account for cash accounting - for the amount of investments in RDR.

The nominal value of the investment is rubles (option 1) or foreign currency (option 2).

Since the accounting procedure for transactions with Russian depositary receipts is not regulated, before carrying out such transactions, banks should make appropriate requests to the local territorial governing bodies of the Bank of Russia and national banks.

1 - Issue of Russian depositary receipts (RDR). A short guide for issuing companies. JSC " Stock Exchange RTS".

2 - Ibid.

L.M. Urskova, JSC Bank Russian Financial Corporation, Head of Financial and Investment Consulting Department
V.B. Potekhin, Russian Development Bank OJSC, chief accountant, chairman of the committee on taxation, accounting and reporting of the Association of Russian Banks

What is RDR

• What is RDR

• Comparative analysis of the procedure for issuing RDRs and GDRs

• How to prepare issue documents for issuing RDRs

• The procedure for disclosing information when issuing RDR

• Contact Information

• Advantages of depositary receipts:

• Access to foreign capital market

• International positioning of the company

• Diversification of the shareholder base

• Increase in share price due to the influence of global demand

• Expanding the potential market for the company's shares

• Increasing business liquidity

• Advantages of depositary receipts for investors:

• Diversification of the investment portfolio through foreign securities

• Transactions with securities according to the rules of the national market

• Reducing the costs of purchasing and storing foreign securities

• Convenient ability to compare prices of similar national and foreign companies

• Trading securities on the national market

• Documentation and notices in Russian

- a security that:

• Russian depositary receipt- a security that:

• certifies ownership of shares or bonds of a foreign issuer

• entitles you to receive the corresponding number of securities presented

• gives the right to receive services for the exercise of rights under the RDR from the issuer of the securities represented and/or the depository of the RDR

:

• Problematic issues of legislative definition of DDR:

• Not all foreign equity/debt securities correspond to the characteristics of a stock/bond under Russian law

• Not all foreign equity/debt securities have names similar to the words "share" or "bond"

Issue of the GDR

• Issue of the GDR

• 1) The investor enters into an agreement with the broker to organize the issue of GDRs

• 2) The broker purchases shares on the foreign securities market

• 3) Shares are transferred to the custody of the custodian

• 4) The custodian gives the depositary an instruction to issue GDRs

• 5) The depositary issues GDRs and transfers them to the global depositary (Euroclear/Clearstream)

• 6) The broker transfers the GDRs to the investor's account

Release of RDR

• Release of RDR

• 1) The investor enters into an agreement with the Russian depositary to organize the issue of RDRs

• 2) The depository purchases shares on the foreign securities market

• 3) Shares are transferred to the global depository

• 4) The depository issues RDRs and credits them to the client’s account

• 5) Accounting for rights to RDRs can be carried out in a separate settlement depository

2 types of programs:

• 2 types of programs:

• Sponsored VDRs

• Unsponsored VDRs

:

• Main issuance documents:

• The decision to issue RDR

• Prospect RDR

• Agreement between the depositary and the issuer of shares on the assumption of obligations to the owners of RDRs

• Rights conferred by shares

• Number of RDRs issued, their ratio to shares

• Stock exchange on which shares are traded

• Information about the issuer of shares

• Information about the depository

• Availability of an agreement with the issuer of shares

• The procedure for exercising the rights of RDR owners

• Financial statements of the issuer of shares (IFRS/US GAAP)

• Information disclosed on the foreign securities market

1. The issuer of Russian depositary receipts is a depositary established in accordance with the legislation of the Russian Federation, meeting the requirements for the amount of equity capital (own funds) established by regulations of the Bank of Russia and carrying out depository activities for at least three years.

2. To relations related to the issue of Russian depositary receipts, the provisions of this Federal Law governing the procedure for the issue and circulation of securities are applied taking into account the specifics established by this article.

3. The issue of Russian depositary receipts is permitted provided that the rights of the depositary to the securities represented are recorded in an account opened to him as a person acting in the interests of other persons. In this case, these rights must be taken into account by the organization that records rights to securities and is included in the list

(as amended by Federal Law dated July 23, 2013 N 251-FZ)

(see text in the previous edition)

4. The issue of Russian depositary receipts, for which the issuer of the securities being represented does not assume obligations to the owners of Russian depositary receipts, is permitted provided that the securities being represented have undergone the listing procedure on a foreign exchange included in the list approved by the Bank of Russia.

(see text in the previous edition)

5. The procedure for issuing Russian depositary receipts includes the following stages:

1) approval of the decision on the issue of Russian depositary receipts by the authorized body of their issuer - the depositary;

2) state registration of the issue of Russian depositary receipts or assignment of an identification number to the issue of Russian depositary receipts;

(see text in the previous edition)

3) placement of Russian depositary receipts.

5.1. The issue of Russian depositary receipts may be carried out without state registration of their issue and registration of a prospectus for Russian depositary receipts, while simultaneously meeting the following conditions:

1) Russian depositary receipts certify the ownership of the represented securities that are in circulation and comply with the requirements of paragraphs 1 and 2 of Article 51.1 of this Federal Law;

2) the securities represented, the ownership of which is certified by Russian depositary receipts, have undergone the listing procedure on a foreign exchange specified in paragraph 4 of this article.

(see text in the previous edition)

7. The requirements of this Federal Law establishing the obligation of the issuer to complete the placement of securities no later than one year from the date of state registration of their issue do not apply to the placement of Russian depositary receipts.

7.1. The decision to assign an identification number to the issue of Russian depositary receipts is made by the Russian exchange simultaneously with the decision to admit Russian depositary receipts to organized trading.

8. The placement and circulation of Russian depositary receipts can be carried out after state registration of their issue or assignment of an identification number to their issue.

(see text in the previous edition)

1) the full name of the issuer of Russian depositary receipts, its location and postal address;

2) the date of approval of the decision on the issue of Russian depositary receipts and the name of the authorized body of the issuer of Russian depositary receipts that approved the specified decision;

3) the name and location of the issuer of the securities being represented, as well as other data allowing it to be identified as a legal entity in accordance with the personal law of the issuer;

5) rights secured by the represented securities;

6) the number of securities presented, the ownership of which is certified by one Russian depositary receipt of this issue;

7) conditions for placement of Russian depositary receipts;

(see text in the previous edition)

9) the rights of the owners of Russian depositary receipts, as well as the procedure for the exercise (sale) by the owners of Russian depositary receipts of the rights secured by the represented securities;

10) the obligation of the depositary to provide, at the request of the owner of the Russian depositary receipt, the corresponding number of represented securities, and if this is provided for by the decision on the issue of Russian depositary receipts, to sell the corresponding number of represented securities and transfer the proceeds from their sale;

(see text in the previous edition)

10.1) the obligation of the depositary to sell the corresponding number of represented securities in the event that the owner of a Russian depositary receipt makes a demand for its redemption, if the owner of a Russian depositary receipt, in accordance with the legislation of the Russian Federation or foreign law, cannot be the owner of the represented securities;

11) if the securities represented are shares (securities of a foreign issuer certifying rights in relation to shares), the procedure for issuing (sending) instructions by the owners of Russian depositary receipts to the depository on the voting procedure and the obligation of the depositary to ensure the exercise of voting rights only in accordance with with instructions from the owners of Russian depositary receipts, as well as an obligation to present the voting results to the owners of Russian depositary receipts;

(see text in the previous edition)

12) the obligation of the depository to disclose information in the amount, manner and terms provided for by this Federal Law and regulations of the Bank of Russia;

(as amended by Federal Law dated July 23, 2013 N 251-FZ)

(see text in the previous edition)

13) the obligation of the depository to ensure that the number of securities represented, the rights to which are recorded in the account opened to it as a person acting in the interests of other persons, corresponds to the number of Russian depositary receipts in circulation;

14) the obligation of the depository to provide services for the implementation by owners of Russian depositary receipts of rights under the securities represented, including the receipt of income on the securities represented and other payments due to the owners of securities, as well as the procedure and conditions for the provision of such services;

(see text in the previous edition)

15) the deadline for making payments due to the owners of Russian depositary receipts for the securities represented;

16) the provision that payment to the depositary of remuneration and (or) reimbursement of expenses associated with the performance of its duties provided for in subparagraphs 10 of this paragraph is carried out at the expense of the owners of Russian depositary receipts;

(see text in the previous edition)

17) information on whether the issuer of the represented securities (a foreign issuer of shares or bonds, the rights in respect of which are certified by the represented securities) assumes obligations to the owners of Russian depositary receipts;

(see text in the previous edition)

18) the procedure for storing, recording and transferring rights to Russian depositary receipts;

19) the procedure and deadlines for compiling a list of owners of Russian depositary receipts for the fulfillment of obligations under Russian depositary receipts;

20) the possibility and procedure for splitting Russian depositary receipts;

21) other information provided for in this article.

10. The decision to issue Russian depositary receipts must be signed by a person performing the functions of the executive body of the issuer of Russian depositary receipts, and certified by the seal of the issuer of Russian depositary receipts (if there is a seal).

(see text in the previous edition)

11. If the issuer of the represented securities (a foreign issuer of shares or bonds, the rights in respect of which are certified by the represented securities) assumes obligations to the owners of Russian depositary receipts, these obligations must be provided for in an agreement between the issuer of the represented securities (foreign issuer shares or bonds, the rights in respect of which are certified by the securities represented) and the issuer of Russian depositary receipts. Amendments to this agreement do not require the consent of the owners of Russian depositary receipts.

(see text in the previous edition)

12. The prospectus for Russian depositary receipts, in addition to the information provided for in Article 22 of this Federal Law, must contain information about the securities being represented, as well as about the issuer of the securities being represented.

Requirements for the composition of the specified information included in the prospectus of Russian depositary receipts are determined by regulations of the Bank of Russia.

(as amended by Federal Law dated July 23, 2013 N 251-FZ)

(see text in the previous edition)

13. State registration of the issue of Russian depositary receipts, registration of the prospectus of Russian depositary receipts is carried out by the Bank of Russia.

(Clause 13 as amended by Federal Law dated July 23, 2013 N 251-FZ)

(see text in the previous edition)

14. If the issuer of the underlying securities assumes obligations to the owners of Russian depositary receipts, for the state registration of the issue of Russian depositary receipts or the assignment of an identification number to the issue of Russian depositary receipts, an agreement between the issuer of the underlying securities and the issuer of Russian depositary receipts, which is an integral part, must be submitted part of the decision to issue such securities.

(see text in the previous edition)

15. If the issuer of the securities being represented assumes obligations to the owners of Russian depositary receipts, the basis for refusing state registration of the issue of Russian depositary receipts and assigning an identification number to the issue of Russian depositary receipts, in addition to the grounds provided for in Article 21 of this Federal Law, is the absence of one of the following conditions in the agreement with the issuer of the securities being represented:

(see text in the previous edition)

1) indication of the rights secured by the securities being represented;

2) the obligation of the depository to ensure that the number of Russian depositary receipts in circulation corresponds to the number of securities represented, the rights to which are recorded in an account opened to it as a person acting in the interests of other persons;

3) indications that the securities presented are issued for the placement of Russian depositary receipts and (or) are in circulation;

4) if the securities represented are shares (securities of a foreign issuer certifying rights in relation to shares), the procedure for the issuance (sending) by the owners of Russian depositary receipts of instructions to the depositary on the voting procedure and the obligation of the depositary to ensure the exercise of voting rights only in accordance with with instructions from the owners of Russian depositary receipts, as well as obligations to present the voting results to the owners of Russian depositary receipts;

(see text in the previous edition)

5) obligations of the issuer of the represented securities to provide information in Russian or in the language used in financial market a foreign language in a volume and time frame that provide the depositary with the opportunity to carry out its disclosure in the volume, procedure and time frame provided for by this Federal Law and regulations of the Bank of Russia;

(see text in the previous edition)

6) the obligation of the depositary to disclose the information provided for in subparagraph 5 of this paragraph, received from the issuer of the securities being represented, no later than the day following the day of its receipt;

7) agreements on the application of the law of the Russian Federation to relations arising from this agreement;

8) agreements on the consideration of disputes arising as a result of non-fulfillment or improper fulfillment of obligations under this agreement on the territory of the Russian Federation by arbitration courts or arbitration tribunals, the decisions of which can be recognized in the territory of the country of the issuer of the securities being represented in accordance with an international treaty of the Russian Federation;

(see text in the previous edition)

9) provisions on the liability of the depository and the issuer of the represented securities for non-fulfillment or improper fulfillment of their obligations under the agreement to the owners of Russian depositary receipts;

10) provisions that the agreement can be terminated without the consent of the owners of Russian depositary receipts, provided that the securities presented are admitted to organized trading.

(see text in the previous edition)

16. The depositary has the right to make changes to the decision on the issue of Russian depositary receipts only in part:

1) changes in the number of securities represented by one Russian depositary receipt, provided that such changes are due to a decrease in the number of securities represented by one Russian depositary receipt (splitting of Russian depositary receipts), or splitting or consolidation of the represented securities;

2) changes in the procedure for the exercise (realization) by the owners of Russian depositary receipts of the rights secured by the represented securities, provided that such changes are due to a change in the volume and (or) procedure for the exercise of the rights secured by the represented securities in accordance with foreign law;

(see text in the previous edition)

4) changes in the terms of the agreement between the issuer of the securities being represented and the issuer of Russian depositary receipts.

17. The changes specified in paragraph 16 of this article are subject to state registration by the Bank of Russia upon the application of the depository with the attachment of documents, an exhaustive list of which is determined by the regulations of the Bank of Russia, and in the event that the issue of Russian depositary receipts was carried out without state registration of their issue and registration of the prospectus of Russian depositary receipts receipts - after approval of these changes by the Russian exchange.

(see text in the previous edition)

18. The Bank of Russia is obliged to carry out state registration of changes to the decision to issue Russian depositary receipts or make a reasoned decision to refuse state registration of such changes within 10 days from the date of receipt of the documents submitted for registration. The Bank of Russia has the right to verify the accuracy of the information contained in the documents submitted for state registration. In this case, the period provided for in this paragraph may be suspended for the duration of the inspection, but not more than for 30 days.